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Marc Hasenfuss

Another day, another commodity

Marc Hasenfuss | Tue, 05 May 2009 10:17
[miningmx.com] -- UNLISTED exploration company UG2 Platinum is diversifying its potential resource base – which is either an inspired or desperate move depending on one’s view of the commodity cycle and junior mining ingenuity.

UG2 Platinum has been around for a few years, but to date has not produced any breathtaking exploration results in platinum group metals (PGMs) from its much-vaunted Trompsburg (in the southern Free State province) and Vryburg projects.

Fund raising efforts have been underwhelming, and the last I heard the company had managed to raise a paltry R7m in 2007. A poor man’s Platfields, one might say.

UG2 Platinum also falls into the category of the unlisted company that persistently refers to a listing, but never actually manages to make it onto a bourse.

As far as I remember, one of the conditions vendors of the Trompsburg project attached to the deal was that UG2 Platinum would list in the near future as part of the acquisition price was settled in scrip.

One suspects that the listing of a platinum exploration junior on the JSE or any other bourse would currently not warrant too much market excitement – which has serious implications for fund raising efforts.

If it’s one thing an exploration company needs it’s an abundance of capital to ensure projects can be undertaken timeously and thoroughly. Last time I looked UG2 Platinum (and I have not had sight of the 2008 financials) did not have a bulging cash coffer.

At this point it seems awfully convenient that UG2 have stumbled on a coal project, and one that appears, from initial claims, to be ‘gusher’.

Coal – despite a cooling off of commodity prices – remains a flavour of the month mining segment, which means UG2 will have the chance to shift shareholder attention away from the less tantalising prospects for PGMs.

According to a press release from UG2 last month, the company is in the process of acquiring Elementary Energy – a Cape Town-based company that holds 30.6% in the ‘Botswana Coal Project’.

Apparently Elementary Energy has started initial exploration activities on the Botswana concession – including the drilling of several percussion and diamond drill holes to determine the extent of the coal.

The press release said the results from the first holes identified the presence of a significant coal seam in excess of 40m thick – claiming "this is extremely positive news as the geological team initially expected a 6m seam."

A hell of lot has been written about coal in Botswana, but the ‘Botswana Coal Project’ appears to be a bit of a mystery. The company certainly did not ring any bells with my mining sources.

I managed to trace Elementary Energy by way of a search on McGregor BFA’s CIPRO research platform, something that provided only scant facts. But some of these facts may well be illuminating.

Elementary Energy was registered in April 2008, and currently lists Gustav Trichardt, Sandro Valoza and Eduaro Amaro as directors.

If the CIPRO information is accurate then Trichardt, who is currently CEO of UG2 Platinum, was appointed to Elementary’s board in April 2008. That means Trichardt has been with Elementary from the get-go.

Valoza – who was appointed to Elementary’s board in February 2009 – is also a director of UG2 Platinum. Valoza is also a director of Silver Seed, venture capital funding specialists that have in the past placed and sold shares in UG2 Platinum.

I did e-mail UG2 Platinum’s investor relations person on Monday around the identity of the Elementary Energy vendors. If – as the directorships displayed in CIPRO suggest – Trichardt and Valoza were the vendors, one has to wonder why this was not flagged as a related-party transaction.

I was also keen to know how much UG2 Platinum paid for Elementary Energy, but at the time of posting there had been no response from the company’s investor relations officer.

I have previously raised related party issues at UG2 Platinum (See story Acronym for "Are you gullible too?") , and really think that a much mooted shift into coal exploration would be viewed somewhat cynically if the company’s acquisition of Elementary Energy was a ‘pally-pally’ deal.



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